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- Buying and owning property has become less of a priority for South Africans thanks to soaring interest rates and an uncertain economic climate.
- More people are showing an interest in rental properties in coastal provinces such as the Western Cape, KwaZulu-Natal, and Eastern Cape.
- Most people opt for rentals between R7 000 and R12 000, while fewer go for properties between R3 000 and R4 500.
- For more stories, visit the Tech and Trends homepage.
With soaring interest rates, many South Africans are steering clear of purchasing property and going for rentals instead, and properties in coastal provinces are seeing the highest demand.
Severe financial constraints and an uncertain economic climate make it increasingly difficult for South Africans to purchase property.
Buying and owning property has now become less of a priority for many, according to TNP's 2023 Q1 Vacancy Survey.
"In fact, the previously strong demand for property ownership shifted to increased demand for residential rental properties," the report said.
Gauteng
Coastal provinces such as the Western Cape and KwaZulu-Natal are seeing an increase in demand.
According to the report, perceived demand in Gauteng was high but the number of available units was also high."However, considering that the number of new building plans approved this year is much lower compared to previous years, market strength and demand has improved slightly," the report said.
KwaZulu-Natal
KZN also has a healthy rental market despite vacancies having increased by 10%, potentially slowing rental growth.
"While still showing erratic demand, supply behaviour remains well above the equilibrium mark. Perceived supply in the province has dropped while demand has increased," said the report.
Eastern Cape
According to the report, the Eastern Cape had seen growth in the value of new building plans approved in the previous year and in 2021, resulting in an improved supply rating for 2021 and 2022.
However, this year, the supply rating improvement has slowed down.
Even though this is the case, KZN has reported a high demand rating of 77.78 points, up from 73.77 the previous quarter.
Vacant properties dipped from a record high at the end of last year to 10.32%. This means one in 10 properties in this province remains vacant.
Western Cape
With the lowest vacancy rate (1.66%) and high demand, Cape Town is the most highly sought-after coastal province in the rental market in South Africa.
The province has also had the highest value of new building plans approved.
The report said:
"However, this investment will come at a cost to the tenant with escalations expected to accelerate, placing the lower rental bracket and income households under pressure to meet expectations," the report stated.
Inland provinces
The rest of the provinces - Mpumalanga, the Northern Cape, Free State, Limpopo and North West - have all maintained a high demand rating in the past three quarters.
Although some of these provinces have experienced strong demand, many people who live there are unable to enter the formal rental market due to affordability.
Flocking to rentals between R7 000 and R12 000
Most South Africans are going for rental properties between R7 000 and R12 000, with these properties experiencing a low number of vacancies.
This rental bracket is followed by properties in the R3 000 to R7 000 price category with a vacancy rate of 6.54%.
Fewer people opt for rentals between R3 000 and R4 500 as they experience a high number of vacancies. Rentals above R12 000 have a vacancy rate of just under 8%.
"Overall, it appears that most rental brackets have recovered to pre-pandemic vacancy levels, and fewer units are standing vacant than before the pandemic lockdown," said the report.
Retaining tenants
Macro issues such as the energy crisis, a weakening rand, inflation, and interest rate hikes play a huge role in the rental property market.
Still, landlords are responsible for retaining tenants by introducing measures that foster easier living.
The report said:
"Meeting tenants' need for predictability will help to attract and retain quality tenants.
"Landlords who provide a small UPS to keep the internet on during power cuts, inverters or solar energy will position their properties more competitively.
"It is particularly important in this environment that landlords vet every applicant thoroughly for affordability and fraud prevention," said the report.
